Good afternoon, ladies and gentlemen, and welcome to the analyst call on the GSK third quarter 2019 results. I will now hand you over to Sarah Elton-Farr, Head of Investor Relations, who will introduce today's session.
Thank you. Good morning and good afternoon. Thank you for joining us on our Q3 2019 results, which were issued earlier today. You should have received our press release and can view the presentation on GSK's website. For those not able to view the webcast, slides that accompany today's call are located on the investor section of our website. Before we begin, please refer to Slide 2 of our presentation for our cautionary statements. Our speakers today are Chief Executive Officer, Emma Walmsley; Iain Mackay, Chief Financial Officer; Luke Miels, President, Global Pharmaceuticals; and David Redfern, Chief Strategy Officer and Chairman of ViiV. Hal Barron, Brian McNamara, and Roger Connor are joining us for the Q&A section of the call. We request that you only ask a maximum of two questions so that everyone has a chance to participate. With that, I will hand the call over to Emma.
Thank you, Sarah. 2019 is an important year of execution for GSK. I'm pleased that we've made continued good progress this quarter with growth in sales in constant exchange rates across the group. Group sales growth of 11% in CER terms, or 6% on a pro forma basis, reflected an increase in sales in all three of our global businesses, with a particularly strong performance in vaccines. The pharma business continues to shift its portfolio shape with strong growth from our newer respiratory products and BENLYSTA. Consumer benefited this quarter from the consolidation of the Pfizer consumer healthcare business, powering sales growth of 25%. On a pro forma basis, the consumer business grew at 3% in line with our expectations.
Group adjusted operating margin this quarter was down two percentage points on a CER basis, primarily due to the impact of generic competition to Advair in the U.S., while also substantially increasing investment in R&D and support for new launches. This was partially offset by a strong contribution from vaccines. On a total basis, earnings per share declined 1% to GBP 0.314, and adjusted earnings per share increased 1% to GBP 0.386, reflecting both our operating performance and a lower tax rate. Iain will give you more detail in a moment, but based on this delivery and our outlook, I'm pleased that we're able to again update our 2019 earnings guidance. Our free cash flow year to date was GBP 2.5 billion, in line with our expectations. Now, as guided previously, cash flows are weighted to the second half of the year.
For this quarter, we've continued to make progress against our priorities for the whole company: innovation, performance, and trust, all to be powered by an ongoing culture change. We've continued to execute on new product launches and have demonstrated strong growth with Nucala and Trelegy in respiratory, and most notably in vaccines with Shingrix, now expected to deliver high teens millions of doses this year with continued improvement in supply. This has been a very important quarter of progress against our top priority of strengthening our pipeline, including three positive readouts in three pivotal oncology studies. In August, we reported positive headline results from our DREAMM-2 study of our BCMA antibody drug conjugate, belantamab mafodotin, in fourth-line multiple myeloma. We're on track here with regulatory submissions, supporting potential first launches next year to help patients who are refractory to daratumumab and are running out of treatment options.
In September, we presented positive data at ESMO supporting the use of ZEJULA monotherapy for women with ovarian cancer in the first-line maintenance setting, irrespective of biomarker status. We're on track here to make regulatory submissions by the end of the year. We also last week received approval for ZEJULA in the later line treatment setting. We also presented at ESMO encouraging data on our ICOS agonist, supporting a move into phase III studies in head and neck cancer in combination with pembrolizumab by the end of the year. We now have positive data in-house on our PD-1 inhibitor, dostarlimab. We plan to make a U.S. regulatory submission for use in second-line endometrial cancer by the end of this year, too. Beyond oncology, it's also been a busy pipeline quarter.
In respiratory, we recently made a U.S. submission for Trelegy in the treatment of asthma and received European approval for Nucala self-administration. In HIV, we received positive data in the ATLAS-2 Month study, looking at eight-week dosing now for our long-acting HIV treatment. This builds on what has already been a very strong year of data supporting the two-drug regimens in HIV. We also recently started phase III studies of our novel antibiotic, gepotidacin, the first in a new class of antibiotics in uncomplicated urinary tract infections and urogenital gonorrhea. Moving to performance, I'm pleased with our delivery on sales growth, on cost control, and on strength and cash flow. We completed the creation of the joint venture with Pfizer and have started work on integrating these two businesses under Brian's leadership, building a world leader in consumer health with a strong and exciting portfolio of brands.
In pharma, we continue to build our specialty capabilities, ready to support the three oncology launches we anticipate next year. We're hiring people with the right oncology experience in the key markets and doing so at pace. Finally, on trust. We want GSK to continue to lead with a broader contribution to society. This quarter, I was delighted to see that ambition reflected in the Dow Jones Sustainability Index, where GSK was listed for the first time as the top-ranked company in the pharma sector. This week, we were pleased to see the final results of our phase II study for our candidate TB vaccine published in the NEJM, potentially providing the global health community with a new tool to help provide protection against TB. In summary, Q3 represents another quarter of strategic progress and good growth, with all our priorities remaining on track.
I'll now hand you over to Iain, who's going to give you some more detail on our Q3 financial performance.
Thanks, Emma. All the comments I make today will be on a constant currency basis, except where I specify otherwise, and I'll cover both total and adjusted results. On slide eight is a summary of the group's results for Q3, which was a strong quarter across all three businesses. Reported turnover growth was 11%, reflecting the closure of the consumer joint venture with Pfizer on 31st July, with group revenue growth at 6% on a pro forma basis. Total operating profit is up 3%, with total EPS down 1%. On an adjusted basis, operating profit was up 3% reported and was down 1% pro forma, while adjusted EPS was up 1%. I'll go through the drivers behind these in more detail in a moment. We delivered GBP 1.9 billion free cash flow in the quarter, in line with our expectations, reflecting higher operating cash flows and improvements in working capital.
In currency, a weaker sterling, particularly against the US dollar and Japanese yen, resulting in a tailwind of 5% in sales and 8% to adjusted EPS. Slide nine summarizes the reconciliation of our total to adjusted results. The main adjusting items in the quarter were major restructuring focused on the supply chain, with also some initial charges for the integration of the Consumer Healthcare JV with Pfizer. Within transaction-related, a remeasurement of the ViiV contingent consideration liability, primarily driven by changes in exchange rates, as well as the unwind of the fair value uplift on inventory taken on as part of the Consumer Healthcare JV. Within the disposals column, the main contributor is a gain from the revaluation of the embedded derivative in respect of GSK's exposure to movements in the Hindustan Unilever share price. My comments from here onwards are on adjusted results, unless stated otherwise.
Slide 10 summarizes the pharmaceutical business, where revenues were up 3%. Luke and David will take you through the performance of some of our key products shortly. I'll just point out a couple of important considerations. Starting with respiratory, sales were up 19%, with continued growth from Trelegy and Nucala across all regions. This was partly offset by Relvar/Breo, which declined 8% globally, driven by a 32% decline in the U.S., reflecting the impact of generic Advair on pricing in the ICS/LABA class. We continue to have good growth expectations outside the U.S. This quarter, sales grew 19% in Europe and 22% in international. Overall revenues in HIV were flat, with the dolutegravir franchise up 2% globally.
The dynamics in this market reflect the impact of competition, as well as the shift within our portfolio towards our two-drug regimens, with growth in Juluca and Dovato offsetting declines in Tivicay and Triumeq. At regional level, dolutegravir grew in Europe and international and was flat in the U.S. We've seen an encouraging start for Dovato, both in the U.S. and in Europe, where we had our first launches this quarter. We continue to build momentum with the two-drug regimens, as anticipated, it'll take several quarters for them to become a significant contributor to growth. Our established pharmaceuticals portfolio declined 5% overall, driven by U.S. Advair sales, which were down 64%, as expected, given generic competition.
This was offset by continued upside on Ventolin from the authorized generic launched in the U.S. earlier in the year, which you will remember is an in-year benefit ahead of the introduction of the substitutable generics expected in 2020. We also saw favorable RRR true-ups in the U.S., primarily on Flovent. Outside respiratory, the remainder of the established pharma portfolio grew by 1% in the quarter, helped by the phasing of some tenders in Europe. Our expectation for the longer term for this part of our established products portfolio, excluding respiratory, remains a mid- to high single-digit decline. Overall, benefiting from some in-year upsides, we now expect to see pharma sales broadly flat in 2019. Turning to the operating margin, we saw a decline in the quarter, mainly driven by an unfavorable product mix and price impact, including notably the impact of generic Advair.
Tesaro dilution, which in line with previous guidance, we expect to have a sustained impact over 2019. In SG&A, some provisions for ongoing legal cases, as well as investment in promotional activity for new launches. In Pharma R&D, spend, which increased by 19%, reflecting our investment behind priority assets. Slide 11 gives you an overview of vaccines performance in Q3, with sales up 15%, driven mainly by Shingrix, but also by meningitis and flu vaccines. Shingrix continues to benefit actions to increase our supply capacity, with revenues in the quarter of GBP 535 million, driven by continued strong uptake in the U.S., as well as in Germany and Canada. With our strength and supply position, we now expect to achieve high teens of millions of doses this year.
We expect to be able to supply slightly more doses in 2020 than in 2019, but as we've said before, we do not expect a significant step change in doses until we bring a new facility online. In our meningitis portfolio, BEXSERO continued to perform well, growing 19% in the quarter, with share gains in the U.S. and strong demand across all regions. Flu was up 15%, which was helped by an earlier season compared with last year. It also reflected share gains, given our speed to market, and a favorable impact from our prior year returns provision reversal. The phasing benefit will wash through in Q4, where we expect a decline in flu, given the higher comparator. Overall, I expect our full-year volume to be slightly ahead of last year.
Q3 operating margin of 50% reflects enhanced operating leverage from seasonality of the business, as well as product mix, including Shingrix and BEXSERO, and higher royalties. Looking forward, Q4 is normally one of our lower margin quarters for vaccines, given mix and seasonality trends throughout the year. While we expect to see a vaccines margin this year above the mid-30s, in the longer term, we'll increase investment in SG&A as we expand Shingrix geographically and in R&D as we invest behind priority assets. Note that this quarter we announced the divestment of travel vaccines Rabipur and Encepur, reflecting actions to further simplify our supply chain and increase focus on and investment in innovation. Turning to slide 12.
Consumer now includes the Pfizer portfolio after the closure of the JV at the end of July, with sales of the new JV up 3% on a pro forma basis, despite a drag of around 1% from the combined impact of divestments and the phasing of low-margin contract manufacturing. We saw good performance from our power brands, particularly in the U.S. and international. We also saw Europe return to growth this quarter. In oral health, Sensodyne grew double digits in the quarter, while in wellness, Panadol continues to perform strongly, and Advil was flat, reflecting a partial recovery from historical supply issues. The integration has started well, and we expect a revised external category reporting structure in place from Q1 2020 to appropriately reflect key drivers of the combined business and to take into account divestments.
The divestment of the Indian nutrition business to Hindustan Unilever is progressing, and we now expect closure in Q1 2020, subject to the receipt of regulatory approvals. We're also moving forward with other divestments which will continue through next year, proceeds of which will help fund integration and restructuring activities. Operating margin in Q3 was 24%, higher as expected, reflecting the benefit of sales of seasonal cold and flu products, as well as the strong ongoing focus on cost control and benefits from restructuring and manufacturing. Worth bearing in mind that Q3 is usually our highest quarter, given this seasonality, and therefore in Q4, we expect higher costs and lower margin as we promote to drive consumption. On slide 13, we summarize sales and adjusted operating margins. At a group level, SG&A increased, reflecting investments in Tesaro and new product launches, alongside continued tight cost control.
While R&D increased as we invest in development for our pipeline, including the Tesaro assets. In royalties, these were higher, driven by Gardasil, and we now expect royalties for the year to be around GBP 350 million. Moving to the bottom half of the P&L, I'd highlight the following. Interest expense, we continue to see the benefit of our refinancing activities. Also note that this quarter also included a fair value gain in interest rate swaps. We now expect an interest expense of between GBP 850 million and GBP 900 million for the year. The effective tax rate in the quarter of 15.8% reflects our ongoing progress in settling historic tax matters in key jurisdictions, and now have a rate of 16.9% year to date.
The changing shape of our business and the transformational M&A we've undertaken, together with the progress in settling historic tax disputes, means that we now expect an effective tax rate of around 17% for the full year. We continue to expect to see an average effective tax rate of 19% over the medium term. On non-controlling interests, we saw the initial impact of Pfizer share profits of the new Consumer Healthcare JV. In Q4, we'll see the first full quarter impact on this line. On free cash flow, we remain focused on driving greater cash discipline across the group and generated GBP 2.4 billion of free cash flow in the first nine months of the year, very much in line with our expectations. This was driven by improved operating profits and working capital management, as well as a benefit from FX so far this year.
Offset by the launch of generic Advair and related phasing of rebates and the upfront payment of €300 million to Merck KGaA. We're pleased with the progress on cash flow, but as previously noted, we do expect to see a step down overall this year versus 2018 as the impact of Advair genericization flows through. A number of the factors that we incorporated into our previous guidance are playing out very much as we expected. We are seeing better operational performance in pharm and vaccines businesses and are benefiting from lower interest expense and a lower effective tax rate. In the remainder of the year, we'll see continued impact from generic competition to Advair, higher non-controlling interests, increased targeted promotion in priority markets, and R&D spend continuing to grow. Taking these factors into account, we now expect adjusted 2019 earnings per share to be around flat compared to 2018.
With that, I'll hand over to Luke.
Thanks, Iain. Good morning and good afternoon. Within pharma and vaccines, our focus on improved commercial execution continues. Although overall, our growth this year is clearly impacted by the launch of generic Advair, we're seeing a strong performance from our new products. Now I'm going to take you through a few examples of where we've made changes to refocus our resources and are seeing positive results. Starting with respiratory on slide 18. Trelegy, I'm pleased to tell you, continues to do well with sales of GBP 139 million in Q3. Globally, launches have had a good start and we continue to drive uptake. We've submitted the data from the CAPTAIN study in asthma to the FDA and hope to get approval next year. Around 30% of asthma patients taking an ICS/LABA still experience symptoms, so this filing is an important step towards giving them an additional treatment option.
Trelegy is now launched in 38 markets around the world, including Japan. We're planning for a launch in China later this year. In asthma biologics, Nucala remains the market leader in total sales in major markets around the world and continues to grow quarter-over-quarter. The launch of the at-home administration, combined with improved execution, has increased our performance in the U.S. retail segment and assisted in our ability to remain the market leader despite competition. Also, this quarter we presented data from the real-world evidence study at ERS, demonstrating highly positive results on reduction in exacerbation and reduction in oral corticosteroid use. We're the first biologic agent to present this data and further reinforcing our leading market position.
At this conference, we were pleased to hear feedback that indicated that our monthly at-home dosing is seen by physicians as very positive in terms of patient compliance, and the opportunity with biologics remains significant, with slightly more than 25% of suitable patients receiving therapy today. Moving to slide 19. I want to highlight that our PARP inhibitor, ZEJULA, remains an important treatment option for ovarian cancer patients in the second-line maintenance setting. We're maintaining our leading position in this indication and are now focused on the opportunity to expand the reach of ZEJULA to women in the first-line maintenance setting through our PRIMA data, which we presented at ESMO last month. The PRIMA data show a clear benefit in using ZEJULA across all biomarker subgroups, provide a unique opportunity to help patients in the first-line setting, regardless of HIV status. We think the PARP inhibitors are an underutilized class.
In the U.S., only 31% of patients currently receive one in the second-line maintenance setting, falling to 12% in the first-line setting. With the data presented at ESMO, I'm confident that this will change. We've now shown that ZEJULA has proven to be a better option than watch and wait and anticipate filing based on this data by the end of the year. Finally, we're pleased to receive approval of our sNDA for ZEJULA in late-stage ovarian cancer based on our QUADRA data. This approval allows us to address the unmet clinical needs of patients and demonstrates that ZEJULA is active as a late-line therapy for women beyond those with BRCA mutations. We're making rapid and material progress on building out our oncology commercial capabilities, and the acquisition of Tesaro has catalyzed this process.
We've also rebalanced our sales force territories in the U.S. and have been actively recruiting people with a great track record of success in oncology into key markets. We're already seeing some of this benefit come through and expect to see this reflected in our sales performance starting from the end of this year as our refocused approach flows through. Moving to the next slide. I think it's fair to say BENLYSTA is a good example of how we are investing more broadly in specialty care and accelerating our growth. With the approval of the subcut formulation in 2017 and increased support behind the product and a new team, we have driven strong performance this year. BENLYSTA remains the first and only medicine for SLE in over 50 years, and yet this condition remains significantly undertreated.
We're also working hard to generate more data to support the increased use of Benlysta. On the back of an investigator-sponsored pilot study, we're evaluating Benlysta with a single cycle of rituximab in the phase III BLISS-BELIEVE study, which started in March last year. The two agents have different but complementary mechanisms of action, early data suggests that a single priming co-administration of rituximab could enhance the treatment effect of Benlysta to provide sustained disease control and could also potentially lead to remission. We'll have the headline results from this study by the end of 2020. We also expect to see data from lupus nephritis at the end of the year. If positive, these studies could become key contributors to future growth. Moving on to vaccines.
We continue to be delighted with the performance of our business, particularly the contributions to growth from our shingles vaccine, Shingrix, and our meningitis C vaccine, BEXSERO. We're pleased with the commercial execution of Shingrix, particularly in the U.S. market, where we've made good progress in accelerating our supply to deliver sales of GBP 535 million this quarter. We look forward to our phased launches in China and Japan next year. BEXSERO has also made a meaningful contribution to growth. We saw strong demand across the regions and share gains in the U.S. market, where we are benefiting from the convenience of our dosing schedule relative to competition. In Europe, where the disease burden is highest in infants, we're also differentiated by our label, where we have the only meningitis C vaccine indicated for this age group. Now for David to take you through performance in our HIV business.
Thanks, Luke. Good afternoon, good morning, everyone. In Q3, sales of dolutegravir grew 2%, while declines in the mature products resulted in HIV sales overall being flat during the quarter. In the U.S., total dolutegravir was flat, reflecting a slight year-on-year share decline as we transition to the new two-drug portfolio. Juluca and Dovato combined now account for approximately 3% of TRX and over 5.5% of NBRx, with weekly scripts of approximately 2,700 and 900 respectively. In particular, we are encouraged by the progress of Dovato, where NBRx is now approximately 3.5% ahead of the Juluca launch trajectory, and with positive feedback received from the early physician and patient adopters. In Europe, we started the launch of Dovato during the quarter and saw dolutegravir up 3%, with good volume growth and market share gains across all major markets, offsetting some price cuts.
In international, we continue to see strong dolutegravir growth, which was up 9%, although slightly lower than previous quarters due to the timing of certain tenders. The launch of Dovato and the strong flow of two-drug regimen clinical data will help support the ongoing growth of the portfolio. In addition to the important 96-week GEMINI data for Dovato and the TANGO switch study that we presented at IAS in July, and which was very well received, during the quarter, we also announced the positive ATLAS eight-week data for cabotegravir, which shows the potential of this medicine to be a once every two months treatment. We expect a regulatory decision on cabotegravir from the FDA by the end of this year. The fostemsavir filing with the FDA by the end of 2019 is also on track. Overall, we continue to be confident in the growth potential of our HIV portfolio.
With that, I'll hand back to Emma.
Thanks, David. As a reminder, we've seen good growth in all three businesses this quarter and have made excellent progress on our three priorities of innovation, performance, and trust. We're on track with our key areas of focus. We're progressing our pipeline with a number of positive data readouts in hand, importantly in our three key pivotal oncology studies, where we've regulatory submissions to come. Also in HIV with our long-acting HIV treatment, where we filed for approval for four-week dosing and also have data in hand for eight weeks. We've also filed for approval for Trelegy in asthma and received European approval for Nucala self-administration. We've progressed other assets, too, with a phase III study started in gepotidacin and plans to start pivotal studies with ICOS in head and neck also by year-end. We're continuing to drive improvements in our operating performance and our specialty capability.
We're working towards a successful integration with Pfizer now that the consumer JV has completed. Successfully delivering these priorities over the coming years will provide a clear pathway to the creation of two great businesses, one focused on pharma and vaccines, the other on consumer health. We're now joined for Q&A by Hal on the phone, and Brian and Roger. With that, operator, the team also here in the room is ready to take your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star followed by one on your touch tone telephone. If your question has been answered or you wish to withdraw your question, press star followed by two. Please press star one to begin. Please stand by for your first question. Your first question comes from the line of Andrew Baum, Citi. Please go ahead. You are live on the call.
Thank you. A couple of questions, please. Firstly, to Luke. The Senate Finance Committee recently proposed a step-up in funding by the industry and PBMs for catastrophic coverage in Medicare Part D, in exchange for a cap on out-of-pocket payments. Thinking about the Juluca and more broadly, your oncology pipeline of small molecules, is this a proposal that GSK supports, thinking about both the direct and indirect potential hit to net revenues, although offset by volumes? That's the first question. Second question, much shorter. I didn't see any commentary on GSK pharma in China. Perhaps you could talk to that performance. Many thanks.
Thanks, Andrew. I'll ask Luke to comment both on China and then add anything on what's happening in the pricing and regulatory environment in the U.S. Just to say that it is obviously extremely dynamic at the moment. There are a lot of different proposals potentially under review, as you know, and we're monitoring all of them very carefully. Obviously also engaging with the administration on them. Just in terms of big picture principles, what GSK supports is working towards addressing some of the real challenge in terms of patient out-of-pocket. That's why we were particularly supportive of rebate reform overall and being able to pass on and pass through to patients some of the discounts that are there. In that sense, a cap on out-of-pocket is potentially a sensible idea. We also support transparency, and anything that simultaneously drives access and innovation.
We continue to monitor which bits will come through in terms of the direct impact overall for us. Luke, I don't know if there's anything you want to add on that, specifically answer the China question.
Yeah, sure. On China, Andrew, if you look at RDPAC, quarter two is the latest information we have. Our growth is around 20%. That's respectable. It's in the middle of the pack there. I think in terms of the future, the key thing is we are putting the building blocks in place now. We've got the launch of Trelegy coming, where a key component of that will be to build acceptance on the part of Chinese physicians to treat COPD more aggressive. The background population is significant. It's enormous, actually. You have background things such as pollution and smoking, et cetera, which drive this. That's one product that we're very interested in. I think with Shingrix, things are starting to improve. Been a bit bumpy, but we're now getting about 120,000 in-arm shots per month, and the trend is upwards there.
If you look at BENLYSTA, which we're now in the process of launching in China, that again is something that will take some time to build, but again, is an innovative product with limited direct competition. Also we're increasingly competitive with Seretide, Flovent, and VENTOLIN. I think it, again, offers smaller base than some of our competitors, but the pieces are falling into place. We have the launch of Shingrix next year, which will be a very targeted initial launch because of the supply elements that you know well. We're also looking right now in terms of negotiation through our access for Anoro and Relvar in China. Hopefully over time, we can get a few of these things lining up and we'll start to grow our base business in China.
Thanks, Luke. Next question, please.
Thank you. Next question comes from the line of Steve Scala. TD Cowen, please go ahead. You're live on the call.
Thank you. Two questions. The first is a follow-up on reform. In GSK's 19-year history, this could be the first time it raised guidance twice in one year, let alone the first three quarters. This obviously shows the strength of the business. Emma, what does it tell us about your real concerns around U.S. healthcare reforms and Brexit? It would seem GSK would not want to show its full strength if it were truly concerned about upcoming changes either in Washington or London. Secondly, on Shingrix, the company continues to say that we should not expect a significant increase in doses produced in the near term, but the high teens number of doses GSK will deliver this year was to have been achieved in two to three years. Some major gains have been achieved despite management's cautions.
Are you saying that a year from now, the number of doses produced absolutely will not exceed 20 million? Thank you.
Thanks, Steve, very much. Actually, your two questions are linked to a degree in terms of what we've been able to over-deliver in terms of initial expectations in terms of operating performance, because obviously Shingrix is going extremely well. This is very much a supply-driven business for us, but it is a fantastic product, and we do expect it to be a material contributor to growth for the company for quite some years yet. Once we got the preferential recommendation and could see that demand was going to very swiftly outstrip supply, we did mobilize very materially across all of Roger’s team to try and increase our supply. It's very complicated to produce a vaccine.
I think whether it be all across that value chain, we've been quite successful in making that progress, which is why we were allowed to bring forward that delivery to high teens. I am not going to put an additional number specifically on the doses for next year, but if you listen to Iain's outline, we said we would expect slightly more doses in 2020. We don't expect a step change until we have that new facility in place, which we've said externally, we're talking about around 2024. At this stage, that is the overall commentary I can provide on Shingrix. In terms of your point on guidance for this year, again, as I think Iain worked to step you through on his presentation, the upgrade this quarter is in part because of operating performance in both vaccines and in pharma.
Also we are benefiting from a shift in our guidance around tax rate, which contributes again this quarter. It's both aspects of it. The link on that in terms of impact of Brexit and the U.S. reform, obviously in terms of materiality, the U.K. is less than 4% of our global business, and the U.S. remains our biggest market and the most important market for innovation still at the moment. Brexit, we've been long prepared for operationally. All of that's been in place, frankly, because we had to secure supply both in the U.K. and in Europe. What we're more focused on is securing, regardless of the new government, a life sciences friendly environment for our heavy investment still in the U.K. beyond the upcoming election.
I'm quite confident about that on the basis that it is a strategic industry for this country, whether it's us or other large cap companies or indeed the sort of biotech and education environment here. The U.S., I see it's, as you all know, extremely dynamic. As we've already said, we're watching it carefully. In some ways it's uncomplicated because as long as we innovate differentially and price responsibly, that will be our best opportunity for driving growth, and we'll just monitor it live as it lands and respond as impact comes through. That was too long an answer to your two detailed questions. Perhaps we'll move to the next one, please. Thank you.
Next question comes from the line of Peter Welford, Jefferies. Please go ahead. You're live in the call.
Hal, hi. Thanks for taking my questions. I just wonder if you can talk a little bit about 2020. I appreciate it's early to give guidance for this year already, can you just perhaps give us some broad terms, what the potential pushes and pulls we should think of? I guess aside from Shingrix, where obviously I think you've outlined that pretty clearly, just in terms of both the top line, but also in terms of the earnings momentum. Just secondly, for Hal, perhaps on the pipeline, I noticed the Daprodustat looks as though it's slightly earlier than we had anticipated. We should get those reads. Just wondering if there's anything we should read into that. Also GSK2982772, the RIP1K, if you could just perhaps give us some insight into why that's gone back into research phase, it would be much appreciated.
Thank you.
Okay. I'll come to Hal in a second on the Dapro and the RIP1K question. The short answer on 2020 is we'll tell you in February. There's no expected change, although there are puts and takes in the overall outlook for 2020 that we've guided to previously. We'll give more detail on that in February. Hal, do you want to pick up the other two questions, please?
Yeah. Thanks for the question, Peter. In regards to Daprodustat, as you say, we've moved up the interim analysis. I should say that that's an analysis we're doing for internal purposes only. As you know, we have a very robust program, while we, I think have very, very high confidence that the drug and probably the class is useful in terms of improving hematocrit, the real question is compared to EPO, whether the cardiovascular profile will be equivalent or superior. We thought it prudent to do an interim analysis, based on events, we felt that we could move up the timing of that. Again, that's internal and more of a safety look. That's why that is. As you know, the full data will be later, that's event-driven, we'll put that out when we can.
Your other question was about RIP1 kinase. We have decided based on an examination of the data generated in three different clinical trials, small phase II-A type trials, to move the molecule back to research. We haven't killed the program, but we felt that based on the data, there's a number of outstanding research questions that need to be addressed to understand why the effect was less than we had hoped for. We have a number of hypotheses that we're not willing to share at this time, but we'll be exploring them either in research studies or even possibly should some of those hypotheses bear out pre-clinically, potentially even moving it back to phase I. That'll be dependent on some research studies that we're going to undertake to understand why the molecule was unfortunately not as active as we'd hoped.
Thanks, Hal. Next question, please.
Next question comes from the line of Graham Parry, Bank of America Merrill Lynch. Please proceed.
Great. Thanks for taking my question. Firstly on Shingrix, could you just help us quantify slightly more in 2020? Is that slightly more each year out to 2024 when the capacity kicks in? For example, if you've taken all the Shingrix capacity out of the glycoprotein E bioreactors already, or is that still an improvement you've got to come? When you bring more capacity online in 2024, will you have the adjuvant capacity to match, or is that going to start becoming a constraint at that time? Secondly, on the ASO HBV, I see you've got data coming on that now at AASLD, the phase II data. Is this a game changer? I think, Hal, you called this out as one of the two most exciting assets with a proof of concept readout at your first R&D day.
Do you still think that's the case? Thank you.
Thanks, Graham. I'll come to Hal on the second question. The short answer, I'm afraid to your first question is we can't give you any more detail than we've just outlined. We reconfirm slightly more in 2020, obviously we're working on this continuously, and it remains fluid. We wouldn't commit to any step change until 2024 with a new site. Obviously we work on all aspects concurrently to make sure that step change can be delivered. Come back to Hal, please, for HBV. Sorry.
Hi Graham. Thanks for the question. I think we remain excited about the potential for the ASO HBV program for a lot of reasons. First of all, it's an incredibly important medical problem. There's, I don't know, somewhere over 200 million people chronically infected with HBV, and many of them, probably over 1 million, will die of hepatic failure, cirrhosis, or even hepatic carcinoma. Available treatments are very limited in terms of the efficacy, and they're certainly not without the toxicity. A novel therapy can be a significant advance for patients and a very important asset for GSK should it work. We reported that the phase II-A data did show significant activity with a reasonable well-tolerated safety profile. That is the A36 molecule. We'll be sharing that data within the next, I think, three to four weeks at the AASLD.
It's also important that it's a very novel approach using ASOs, as you mentioned. That opens up an opportunity for us to think about that as a novel modality for intervening, particularly in liver disease. We're excited about that. It's early days, and we're working with the regulators in multiple countries, actually, to figure out how to move the asset forward into a Phase IIB study. As I said, the data will be forthcoming at the liver meetings next month.
Thanks. The only other thing about that, whilst reiterating the early days point, is the relevance, potentially, of that asset should the data make it worth progressing for the China market. Really to reinforce what Luke was saying earlier, that is obviously a deregulating, increasingly innovation-focused market where we're starting from a low base, but we're thoughtful about the pipeline we may be able to bring over the years ahead. Next question, please.
Next question comes from the line of Richard Parkes, Deutsche Bank. Please go ahead.
Hi. Thanks for taking my questions. First on financial one and then a pipeline one. I thought I'd give another try to Peter's question on outlook for 2020. Just more whether you could give us some kind of directional steer on the pushes and pulls on the margin in 2020. I think you've already highlighted there's likely to be pressure on the vaccines margin. Given the need to reinvest, I'm wondering what other positives or negatives there might be, and kind of directionally where R&D spend as a % of sales might be moving. Just sort of detail there. Second question, I wonder if you could give us some clarity on when we might see the efficacy data from the PRIMA study by starting dose.
If you could help us understand how confident you are you can get that individualized dosing in the label, given that only a third of patients in the PRIMA study were eligible for that revised starting dose. Thanks very much.
Thank you. We'll come to Hal in a minute on PRIMA and dosing. On 2020, I'm going to reiterate that we'll update you on 2020 in 2020. Iain might want to add a couple of comments really repeating what he said in his introductory remarks around some of the dynamics between vaccines and our choice to invest in R&D. The only thing that I would say quite firmly is we do not believe in targeting a fixed percentage of R&D spend. We are very clear on our capital allocation priorities, and right at the top of that list is strengthening our pipeline for future growth. That means investing behind new launches as we have been, their execution, but also investing in R&D, and that's been a big driver as you've seen with increases this year.
As data demands, we would expect to continue to do so, but certainly not as just some kind of target because people can always spend money. The discipline that Iain is driving around that, but likewise in vaccines. As Iain also mentioned, over the next few years as proof of concepts come through for our next wave of vaccines pipeline, should that data merit it, we will want to back those. Long may the Shingrix contribution continue, but we're obviously very thoughtful about what may come in the longer life cycle of vaccines development. Iain, would you like to be any more generous in the insight in 2020?
I won't use up too much of the clock talking about things that we will do and talk about it when we do the full year results in 2020. I think if you reflect on what we talked about as we walked through the numbers and the priorities of the company from an innovation, performance, and trust, it's clearly focused on growth. An important part of that is supporting launches of assets in priority markets and investing behind R&D. The broad shape of where we will allocate capital and our energy and resources will not be significantly different to where we've invested those resources over the course of 2019. We will give you guidance that you can sink your teeth into when we get the full year results out in February next year.
Thanks, Iain. Next question, please.
Next question comes from the line of Keyur Parekh, Goldman Sachs.
Oh, sorry. I forgot. We weren't extremely important. Can I come back to Hal on PRIMA? Sorry.
Okay. Yeah, thanks. Richard, if you can still hear me. Thanks for the question, and I think it was related to the subgroup that received the weight and platelets in a prospective manner. We're in the midst of evaluating that data right now. As you can imagine, as you said, it's a smaller subset, so that's challenging to do both the analyses overall, but more importantly in each of the subgroups. We're mostly through that. Once that data is analyzed, we will be submitting that to regulatory authorities and publishing it at a meeting, although we don't have a date set for that. I should point out two things.
First, clinicians, I think, are very cognizant of the fact that using the weight and platelets dosing regimen where you adjust the dose down to 200 milligrams when the body weight is in excess of 77 kilograms or the platelet count's below 150, and I think we're pretty confident that that does reduce the incidence of thrombocytopenia. The prospective analysis is looking at how similar the treatment effect is. As I said, we'll have that data soon, but most of the clinicians are already sort of using that kind of dosing paradigm as they treat their patients today.
Thank you, Hal. Apologize. Back to the next question, please.
Thank you. Keyur Parekh, you're live on the call, please ask your question.
Good afternoon,
Kayur, we lost you. Hello? Okay, I think we've lost Kayur. Maybe I can come back and ask for another question, please, and then we'll come back to Kayur in one minute.
Thank you. Next question comes from the line of Geoff Porges, SVB Leerink. Please go ahead. You're live on the call.
Thank you very much for offering the chance to call. A pipeline question, if I may. Could you give us a sense of when your pentavalent Men vaccine, when we'll see that phase II data? You haven't given a timeline, what would be the criteria for proceeding to phase III? Thanks.
Sure. Roger, over to you.
Yeah. Thanks for the question. I think from an ABCWY point of view, we're obviously committed to developing that product. As you know, we're bringing together BEXSERO, the world's leading meningitis B vaccine, with Menveo. We just completed phase II. In terms of studies, we've looked at 1,400 subjects in that study. Actually, at the moment, we're engaged in regulatory discussions around the pathway and how we take it forward into phase III. It'll be through the first half of next year that we'll be looking at the data from the phase II.
Thanks, Roger. Do we have Keyur back yet? No. Okay. Next question, please.
The next question comes from Laura Sutcliffe, UBS. Please go ahead. You're live on the call.
Hello, thank you. Two questions, please, both on HIV. I think you've talked about the business transitioning to a new portfolio in terms of HIV drugs. Whilst Triumeq's obviously still going to be an important drug for many patients, how should we be thinking about the resources you'll be putting behind that versus other drugs in the portfolio in future? In other words, should we be looking at this as more of a legacy product from now on? You should, all being well, be able to launch your injectable product next year. Assuming it becomes a product that has a once every 8-week option further down the line, is that ultimately the optimal profile for that sort of product? Would you try to refine this or any other injectable any further? Thank you.
Thanks. Both of those for David, please.
Yeah. Hi, Laura. I think we've said several times that we really see the future growth of the HIV portfolio coming from the two-drug regimens, whether that's oral or, as you say, hopefully the first long-acting on the market next year. In the case of oral, and principally Dovato, that of course is powered by dolutegravir. Our efforts are really promoting two-drug regimens. That is where we're putting our resource. This year, behind Dovato and Juluca, and next year, including cabotegravir. As I said in my remarks, it's relatively early days, but we're pleased with the progress. Sales of two-drug regimens of GBP 119 million in the quarter, and hopefully more to come as we get the guidelines updated, and the label updated in the U.S. for the positive TANGO data.
I would also say that weight gain on the TAF side is becoming a growing issue. We saw a bit of that with the ADVANCE study at IAS, more recently, the pooled meta-analysis of, I think there were about 5,700 patients from eight studies. Meta-analysis is never perfect, as you know. There is growing noise around that, we'll have to see how that plays out. I think on cabotegravir, look, we're excited about this. Great data, FLAIR and ATLAS studies, we've supplemented that with the eight-week data this quarter. It won't be for every patient. I think there'd be a lot of patients happy to continue on oral therapy. For those patients that are interested in moving, they're very passionate about it. Clearly, every eight weeks, I think, will be preferable to every month.
Ultimately, if we could move it out to coincide with patient visits, which typically now are every six months, that would be better. Every eight weeks is a major step forward, and we're very excited to produce the first long-acting medicine on the market.
Thanks, David. Next question, please.
Next question comes from the line of Keyur Parekh, Goldman Sachs. Please go ahead. You're live in the call.
Hi. Can you guys hear me okay now?
Just perfectly, Keyur.
All right. Thanks. Two questions, please. One for Luke on ZEJULA. Look, given the data we've seen at ESMO, would you expect ZEJULA to be on the NCCN guidelines? If so, can you help us think about the timelines associated with that pre the FDA approval? Secondly, on China, and I know you've made some comments about the growth rate, but clearly the base of business still remains to be very small. Merck just reported a 90% growth for GARDASIL this quarter. When do you think China will become a relevant/substantive part of the business? Is it likely in 2020, or should we think of it as an opportunity beyond that? Thank you.
Thanks, Keyur. We'll give both those questions to Luke.
I think in terms of China, beyond that, Keyur, I think we're going to need to see assets like Shingrix under full supply to materially shift.
Our base business in China. Cervarix, again, our target right now, maybe about 60% of our business from school-age girls. That's a program which we only launched a couple of quarters ago, and it's been very successful. Again, it's an interesting battle there. We do have some age advantages versus Cervarix, and we're now concentrating on that. We've also made changes to the team in China, which again, I think will become more visible in time. Material change to significant scale is further out. In terms of ZEJULA, we believe the NCCN guidelines committee is going to be meeting around the 31st of October. I guess the question is, we have published PRIMA in The New England Journal.
We have yet to see a publication from the other study, and we have not filed the PRIMA data with the FDA, as you said, at this point. I guess the open question is going to be, will the committee move ahead and signal their support for PRIMA based on that scenario? Will they wait to either we've filed or the second study is published. It's hard to speculate. As you can imagine, we're certainly making our case that we believe the guidelines should change. Now, whether they change in October or whether they change in a couple of months' time, I still think the days of watch and wait are going to be increasingly difficult to justify. Again, when we announced the deal, that was a key assumption of ours, that, as Hal has said, that the PARP class is underutilized.
I think it's a matter of time, but we would like it to come sooner, obviously, for the benefit of those patients, and we'd see that flow through for ZEJULA.
Thanks very much, Luke. Next question, please. I think we have one more. Is that right? Yeah, one more question.
Thank you. Tim Anderson, Wolfe Research. Please go ahead. You're live in the call.
Thank you. I have a vaccines R&D question. With Shingrix, you've shown that you can go into an existing market with a better product and do quite well. I'm wondering if that is capable of being repeated in a couple of other areas where you already have a presence. With GARDASIL, for example, with Merck, that can be a GBP 7 billion or GBP 8 billion product over time. You have a product in this space, didn't gain much traction, but what about trying to come up with a new version that is more competitive? Same question in the Prevnar space too, where you have Synflorix. Should we assume that you will not try to reenter these areas with new and improved products, or could this be a possibility?
Second question on Consumer, now that the transaction has closed with Pfizer, just an update on timing of the spin. I guess the real question is why it really needs to take three years. Could it be pulled forward? Is that guidance of three years overly conservative?
Okay. Thanks very much, Tim. I'll ask Roger to talk to you about the vaccines pipeline, then I'll come back finally on the group demerger.
Listen, thanks very much for the question. I have to say there's a high degree of excitement in vaccines about the pipeline that we've got. A couple of general comments first. Obviously, we're pleased with the breadth that we have and the shift that we're making into therapeutic vaccination, treating disease rather than simply preventing. I think a backbone of that strategy is our adjuvant technology, actually, and our adjuvant platform. As many of you know, that adjuvant system is a key part of what has made Shingrix so successful. In our vaccines pipeline, we're really looking to maximize that. A couple of assets that I would draw out that I think we can really use to optimize that are COPD, vaccine for chronic obstructive pulmonary disease.
An exciting year next year when, in the second half, we should see the proof of concept data that has AS01 in it as well. That's the only vaccine really in development for COPD. Huge opportunity there, just given GSK's legacy in this space. To take the U.S. alone, where there's 16 million people suffering from COPD, we really believe that that vaccine could have a really significant impact to reduce acute exacerbation and disease progression with such a proportion of exacerbation linked to infection that the vaccine will treat. On RSV as well, I think we're looking to use our platform technology and our science, again, to differentiate. I've mentioned before, we've got three vaccines in the RSV space. Again, maternal, we think, just linking to your question around where can we exploit our knowledge and experience.
We have maternal vaccination experience with BOOSTRIX, for example, and we really feel with that experience we can drive our maternal vaccination in RSV. Our older adult vaccine I'm excited about as well. It builds off the adjuvant platform also. Big opportunity there. In the U.S., 70 million people over the age of 60. We have a pediatric vaccine in RSV too, which builds off another platform we have, which is our viral vector platform too. Lots going on in the vaccine space and others in other assets in the early stage, like our hepatitis B vaccine, our C. diff vaccine, again, that builds off our adjuvant platform.
Thanks, Roger. On consumer health, there's no change to our declared intent to separate the consumer business around 3 years from close. That is not a rolling 3 years. We've already clocked down a quarter. The reason that we think that is around the right time is because we have the experience of doing this before. Both Brian and I and the board believe and know how big a job it is to integrate two companies successfully whilst continuing to perform competitively and extract the synergies that we're confident and committed to delivering. At the same time as making sure that that business is set up for success and a great start independently. It is during this period that we're continuing to work to make progress on our pipeline, both in pharma and in vaccines, and the build of our specialty capability as well.
We think this is around the right timeline. Obviously, that is, this time around, a decision that GSK is in control of up to five years. Should we ever change our view on the target date of that, we'll update things. For now, that's certainly no change to that at all, and we think about right. With that, thank you very much, everybody, for joining the call today, and we shall look forward to talking to you soon. Thank you.
Thank you.